Farmington Company Makes Sacrifices To Survive

A Sacrifice For Survival

FARMINGTON — In the struggle for survival among Pratt & Whitney's subcontractors, Roger J. Fredericks is gambling he can hold onto his slice of the shrinking pie.

Fredericks had to cut his prices. He embraced the jet engine maker's quality requirements. And thus far his gamble has paid off: His company, J.F. Fredericks Tool Co., in the Farmington Industrial Park, was selected this summer as a "preferred supplier" to the giant United Technologies Corp. engine division.

In many ways, the changing relationship between Pratt and Fredericks, which has led to a changing relationship between Fredericks and its own suppliers, is a microcosm of how Connecticut's industrial base is adjusting to the prolonged recession. It is also an example of how companies are making sacrifices to retain customers and jobs in the state.

A two-year agreement, signed July 31, locks Fredericks Tool into every job it had been doing for Pratt, including the production of a range of parts such as variable vanes for Pratt's largest civilian turbofan, the PW4000, which powers jumbo jets.

But to secure his preferred-supplier status, Fredericks had to bring his company's production processes in line with those of Pratt, which has been working to improve its own efficiency to absorb military and airline cutbacks. Pratt's operations in the United States lost money for the first time in at least 50 years in the quarter ended Sept. 30.

To rebound, Pratt has been slashing its costs dramatically. Between Jan. 1 and next June 30, the company has projected it will eliminate 7,500 jobs worldwide.

And in a "vendor reduction program" that has suppliers cursing across the state, Pratt is dropping hundreds of the machine shops and vendors with which it formerly did business.

Those who are left have had to make concessions. Fredericks agreed to sell his parts to Pratt for 10 percent less in return for Pratt's help in lowering his operating costs and adopting

Pratt-approved procedures known as "total quality management."

Pratt representatives have been talking with subcontractors for years about enhancing their product quality, reducing their costs and improving their delivery schedules.

"The people that listened, and the people that started practicing it, are the people that are around today," suggests Fredericks, 58, who took over the business started by his father more than 40 years ago. Fredericks Tool does nearly two-thirds of its business with Pratt, but also works for other American and foreign manufacturers and the military.

Passing the slimmer profit margins down the line, Fredericks, in turn, has had to ask his suppliers and vendors to accept comparable price cuts from him in order to retain their piece of the business.

The thinner margins have become a fact of life in the aircraft business.

"Pratt is asking the subcontractors to take cuts in exchange for having them as preferred suppliers, and Pratt is giving them some help," observes Luis A. Chong, an Avon-based investment banker and aerospace consultant familiar with Connecticut aircraft subcontractors.

Chong said Pratt and other American prime contractors are modeling their new arrangements with subcontractors on Japanese-style relationships. Industrial giants such as Toyota and Mitsubishi have large networks of captive suppliers, many of which do work exclusively for them and some of which are partly or entirely owned by them, he said.

Fredericks says his company, with 70 workers and annual sales of about $6 million, has been losing money for the past two years. Yet, with little debt, Fredericks says his company is in better shape financially than most competitors. His hope is that he can keep his preferred supplier status when his current contract expires and stick with Pratt until its own business picks up.

"Right now," Fredericks said, "I'm devoting my time in the next two years to make sure that when this vendor reduction happens again, Fredericks will still be here."

Fredericks describes his evolving relationship with Pratt as "a two-way street." To become a preferred supplier, his company underwent process and asset reviews by Pratt inspectors. Once he was selected, Pratt representatives began helping him with everything from reducing the time it takes to set up a machine to working with other suppliers to negotiate group insurance rates.

Fredericks called nearly 100 of his own suppliers to a seminar on Sept. 8 at the Hartford Marriott Farmington Hotel in Farmington to apprise them of his new relationship with Pratt and ask them to reduce their bids to help keep him competitive. Three representatives from Pratt attended the seminar, and U.S. Rep. Nancy Johnson, R-6th District, stopped by. Thus far, dozens of the Fredericks suppliers have agreed.

Cheryl Lounsbury, the New Britain-based district director for Johnson, says Fredericks is a pioneer in the type of "creative thinking" that will help Connecticut's small businesses weather the recession.

"We're not only in a bad economic climate, but we're changing from a wartime to a peacetime economy," Lounsbury says. "We're hit with a double whammy. And what Fredericks was saying is everybody gets hurt, but everybody works together to position themselves for

the future."

Referring to the Fredericks seminar, she recalls, "What you really saw at that meeting was a tremendous atmosphere of teamwork and hope."